Article excerpt

Byline: THE WASHINGTON TIMES

Precisely when did Howell Raines - the newly appointed, reputedly hard-charging executive editor of the New York Times - turn the newspaper's front page over to the PR department at Citigroup? Hard to say, but the love affair seems to be real. One recent story in the New York Times began with the observation that Mr. Rubin, a former treasury secretary in the Clinton administration, "has not abandoned his role as globe-traveling statesman." Get it? Statesman. Having established the diplomatic bona fides of Mr. Rubin, who now collects $800,000 per week as chairman of Citigroup's executive committee, the Times then ever-so-gingerly broached the understandably touchy subject of the tactics deployed by Mr. Rubin late last year in a telephone call to the highest-ranking Democrat in the Bush administration's Treasury Department.

On Nov. 8, Mr. Rubin called Peter Fisher, undersecretary for domestic finance, on behalf of the collapsing Enron Corp, which just happened to owe Citigroup an estimated $1 billion. According to a Treasury Department statement, which Mr. Rubin has confirmed, he beseeched Mr. Fisher to intercede for Enron's benefit with the credit-rating agencies, which were poised to downgrade Enron's debt to junk status. The debt downgrade would have forced the already-teetering Enron to make an immediate payment of hundreds of millions of dollars in debt, a development that would have then forced Enron to file for bankruptcy. To his everlasting credit, Mr. Fisher rejected Mr. Rubin's strong-arm tactics, and Enron's debt was appropriately downgraded.

Once bankrupt, of course, the unsecured debt Enron owed Citigroup would become worthless. But that's not all. At the very moment Mr. Rubin made his improper telephone call, Salomon Smith Barney, Citigroup's investment banking unit, was serving as an adviser to Enron for its proposed merger with Dynergy. Salomon would have shared nearly $100 million in investment-banking fees with J.P. Morgan if the merger were consummated.

In addition to the foregone merger fees, Citigroup stood to lose another $250 million from a very controversial loan it had extended to an increasingly desperate Enron in late October. As the Wall Street Journal reported, Citigroup agreed to contribute $600 million to a $1 billion loan package for Enron if the beleagured energy-trading firm promised to use $250 million of that cash infustion to pay off an unsecured debt for that amount owed to Citigroup and coming due in early December. …